Bitcoin Struggles to Bounce Back from Deleveraging Crisis

Crypto’s slump continued last week, with bitcoin sinking further below the $100,000 mark to a six-month low. The overall market cap for all digital assets had fallen to $3.3 trillion as of Friday, down nearly a trillion dollars from early last month.

Analysts at 10x Research said crypto’s officially in a bear market, Bloomberg reported. That would mean bitcoin hasn’t hit bottom yet: In previous bear markets, it fell 30% to 40%, and it has so far fallen 20% from its 2025 peak in this cycle.

But other experts say signs point to a short-term slump rather than the start of a prolonged downturn. In part, that’s because the event that sparked the initial slide, a massive deleveraging of crypto assets, has largely subsided.

Unwinding Aggressive Bets

Crypto’s current downturn began when investors deleveraged all at once, rapidly exiting futures contracts where they had previously predicted a rapid rise in bitcoin. On October 10, investors liquidated nearly $19 billion in leveraged crypto positions, a record single-day wipeout. On that day, President Trump’s announcement of 100% tariffs on China, which came after Wall Street’s closing bell, catalyzed the deleveraging event in which investors turned to the 24/7 trading world of crypto to play out their fears.

A little panic can go a long way in a market where traders are using leverage:

• Roughly 1.6 million traders who had essentially borrowed money to hold larger positions saw their contracts closed as bitcoin’s price quickly fell below the margins they had predicted it would stay between. These automatic closures cascaded, putting more downward pressure on bitcoin’s price, which caused more leveraged positions to be forcibly liquidated, and so on. 
• A month later, open interest in bitcoin futures, options and perpetual contracts is still hovering around $140 billion, a dramatic drop from the $220 billion of outstanding contracts before the October 10 crash. When it comes to predicting whether bitcoin will continue to bottom out or bounce back, optimists and pessimists are both holding billions on either side of the price spectrum. Interest in contracts at the $90,000 and $95,000 level has surged, according to Derebit data. 

Hard Reset: Some experts argue that this was a necessary and expected cleanout of leveraged positions, which could reset the market for a healthier 2026. In the meantime, investors will be watching for where bitcoin hits bottom. JPMorgan analysts estimate that it could be buoyed above a floor price of $94,000 and within a year could rise as high as $170,000.